When employing individuals or doing business with third-party contractors who will be contributing to new technology or creative works, it is crucial to pay attention to Intellectual Property (IP) ownership language in your agreements and in particular employment or service agreements.

Employment and Contractor Agreements

In the United States, patent rights vest with the inventor, NOT the inventor’s employer. This is why it is vitally important for employers to have employment agreements that include assignment language so the inventor’s employer owns the IP rights (including the patent rights) of the employee. Having the proper assignment language is also important because certain courts have held that language indicating a promise to assign patent rights (e.g. “Employee shall assign”) is not effective and that language indicating a present assignment of rights (e.g. “Employee hereby assigns”) is necessary.

This same caution applies in situations that involve engaging with third-party contractors – it is important to ensure that the contractor assigns his or her IP rights as part of the agreement to ensure ownership of any IP rights that are developed by the third-party contractors.

As for copyrightable works, “a work prepared by an employee within the scope of his or her employment” is a “work made for hire” and therefore the work is owned by the employer. In fact, the employer entity is considered the author of the work. However, this is NOT the case for non-employees such as contractors or other service providers. In such instances, the creator of the work would retain ownership absent appropriate assignment language in an agreement. This could potentially create sticky situations where a company pays for services or commissions a third party to create a work, but does not receive any rights to that work. Common examples include hiring a web or software developer, hiring an ad agency to rebrand, or hiring a writer to create web or blog content. In each of these situations, it is important for the agreements to include an assignment of copyright ownership, or at the very least, a license to use the work product as intended. Otherwise, you may not own what you think you own even if you paid for the work.